BASSETERRE, St. Kitts (July 19, 2010) - The composition of the economy of St. Kitts and Nevis is similar to any developing country which posses little or no natural resources and is posturing as service oriented economy. The Prime Minister and Minister of Finance in his address to the Chamber of Industry and Commerce at last acknowledged that the global financial crisis has adversely impacted this Federation and has resulted in part a negative economic growth of 9.5% in 2009.
This is in contrast to his postulations during the Budget presentation on March 23rd 2010 when he informed the Nation that “we have weathered the storm” and that retired persons could “seek employment in our expanding private sector or by taking advantage of the many opportunities for entrepreneurship that abounds in our economy.”
The harsh economic realities facing this Government seem to have eluded the conceptualisation of the politicians and the technocrats who have abandoned their roles to political subservience. The Government has pursued a policy of taxing, spending and borrowing to finance the inevitable deficit.
Prudent fiscal management was rejected with a view that money to finance any project or deficit was just a few hours away in Trinidad. Thus the National Debt of $3,000 million with a debt service ratio of approximately 200% of GDP was accumulated at an alarming rate to which the Prime Minister referred to as being akin to his posterior.
According to the Government’s Estimates for 2010 Debt service payments amounted to EC$183 million. It is 42% of Recurrent Revenue which is projected as$433 million. However wages, salaries and emoluments accounts for another 41% (minister of Finance).
The financial report for the first quarter of this year reveals a Primary Surplus of EC12 million. However debt service for that period amounted to EC$45.75 million. This resulted in a deficit of EC$33.25 million. This has to be financed by borrowing from local banks.
The real issue is how to stimulate this economy, which plummeted unabated with the
tacit acquiescence of a Government which continued to deceive the Nation that all was well with the economy. Unemployment has risen to double digit figures, young people are the most affected. They are unable to find jobs and the family budget is stained, thus they find solace in gangs where at least they can be fed and become part of a family. As disposable income disappears the level of crime and criminal activity increases.
Today, 400 school leavers are now on the job market. There is no future for them except in the Prime Minister’s Utopia in which “employment opportunities abound in an expanding private sector and many opportunities for entrepreneurship exist in an expanding economy”. Many of those who left school at the end of 2009 are still unemployed. These youths are mostly in the poverty segment of the economy, which in 2007 embodied 25% of the population. The number has grown significantly with the recession and the drastic reduction in remittances from Europe and North America.
The economy has contracted (ECCB report) and the recession will continue into 2011. The nation has no productive sector and therefore unable to generate revenue from employment or in an export market.
Government has continued its free spending habit by announcing ten Ministries and four special advisors, three (3) in the Ministry of National Security. Each advisor is being paid $84,960.00 a total of $339,840.00 in addition to their already substantive post. (Draft Estimates for 2010). The prevailing view is that making grandiose pronouncements on crime and appointing special advisors with nothing to contribute to that particular position will solve the desperate economic and social situation, which engulfs this Federation.
The introduction of the Value Added Tax will increase the cost of living for every household in the Federation. For example an item with CIF value of EC$100 after the duty, consumption tax, customs service charge and mark up by both wholesaler and retailer would be sold to the consumer for EC$214.83. The same item under VAT would cost $247.47.
It is therefore disingenuous of the Prime Minister and Minister of Finance telling the Nation that VAT would reduce the cost of living. It should be noted that VAT would be charged on services, including insurance, construction, electricity and agricultural products sold in the supermarkets.
Meanwhile the Government is contemplating other taxation measures, which will reduce disposable income in order to finance the National Debt, which hardly benefitted the people of this country. The Prime Minister will continue to traverse the globe in search of the elusive investor.
